Coffee Price Surge Boosts Brazilian Land

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Coffee Price Surge Boosts Brazilian Land

As New York’s Commodity online
has recently reported, the recent coffee price surge has done nothing
to dampen the world’s taste for Brazilian coffee, with exports to Arab
nations jumping 44% in monetary terms month-on-month, reaching $20
million for March alone. Total exports for this quarter are 36% more
than Q1 2010, garnering $58.9 million.

Rising prices are being
driven by a global taste for coffee, as booming markets like India and
China view coffee as a western luxury and switch from tea. As the
world’s largest producer of coffee, Brazil is well-placed to gain from
this development, particularly as it has started to diversify away from
its staple Arabica beans towards Robusta coffee, exports of which
quadrupled to 183,421 bags in March.

Furthermore, with adverse
weather predicted to reduce Colombia’s coffee crop, Brazilian exports
are set to be in even greater demand. Colombia is the world’s
second-largest producer of washed Arabica beans after Brazil.

Brazilian
agricultural land promises a sound investment, as despite these
promising developments in the coffee market, Brazilian coffee output is
actually declining. According to the country’s agriculture ministry,
2011’s output will be a full 13% smaller than 2010’s.

With coffee
prices soaring, Brazilian agricultural land is the ideal way for
overseas investors to tap into Brazil’s growth. Foreign investors
possess the same rights as domestic buyers, and the Brazilian government
is actively seeking to encourag foreign investment.

Brazil’s swathes of rural farmland
in regions such as Bahia – already accounting for 30% of GDP – offer an
attractive long-term investment opportunity. Agrifirma Brazil, a UK
farm fund backed by Lord Rothschild, has embraced under-valued regions.
In April 2010, the Financial Times highlighted regional
growth, claiming that ‘western Bahia has also attracted interest from
foreign investors… “today, without a doubt, Bahia is better positioned
because of the quality of land and logistics”’ (FT, 15/04/10) according to an Agrifirma spokesman.

Furthermore, agricultural land investments
in fast-growing rural regions such as Bahia reduces the risk of being
caught up in the urban property bubble which may be developing in the
southern Brazilian cities of Rio de Janiero and Sao Paolo. As Dan
Freeman, the managing director of a British-backed Brazilian property
company, Brazil Bahia Property, notes, ‘rural areas such as Bahia are
still massively under-valued, yet their huge agricultural and industrial
potential is ripe for development.’

Brazil’s land promises even more growth

Brazil
boosts the most under-utilised farmland in the world, more than twice
as much as America and Russia combined, according to the UN’s Food and
Agriculture Organisation.

This farmland is savannah – rigorous
environmental protections ensuring that the pristine Amazonian
rainforest will remain untouched – and so can be utilised without
environmental or ethical concerns.

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